Pleasures and Perils of Paid Time-Off Plans

Weary of the costly games some workers play with elaborate systems of vacation, personal and sick days, many large employers have shuffled the deck and called a new game: Paid time off (PTO).

PTO plans, by which employees accrue days off in a single account and spend them more or less as they wish, are a mixed bag from the worker’s point of view.

“Workers who are healthy and who have healthy families love PTOs,” because they can take some of the days that were formerly classified as sick days as vacation, says Therese Hoehne, director of human resources at Aurora University in Aurora, Illinois.

Conversely, those accustomed to taking “sick of work” days to use up allotted sick days dislike PTO plans, she notes. Indeed, says Arlene Vernon, a human resources consultant in Eden Prairie, Minnesota, “some companies realize that employees with absenteeism problems have been getting a better benefit” under traditional plans with dedicated sick days.

Drawbacks and Advantages

PTO plans have at least one major minus for workers: Employers converting a traditional time-off plan to a PTO plan usually don’t give workers the full sum of the previous accrual rates for vacation, personal and sick days; they curb the high cost of time off by shaving some days off the grand total. For example, a worker who received 15 vacation days, three personal days and six sick days under a traditional plan might receive only 20 paid days off under a PTO plan to cover all these contingencies.

On the plus side, whereas unused sick days under a traditional plan generally cannot be carried over to the next year, unused PTO days usually can be, often subject to a cap on total days accrued. If an employee budgets himself for five sick days and uses only two in the year they accrue, he can usually carry over the remaining three and use them as he sees fit.

Furthermore, “in most states, paid time off, like vacation time, has to be paid out when the employee leaves the employer,” says Harry Secaras, a partner in the labor and employment practice at Neal, Gerber & Eisenberg in Chicago. You can find out more about your rights under the law by contacting your state’s Department of Labor.

“Most employers will tie PTO into their disability benefits,” Secaras says. “They’ll allow you to carry over enough PTO days to get through the deductible period” before short-term disability coverage begins. But looking at this situation the other way, a month-long illness could kill your plan for a two-week vacation by forcing you to use 10 or more PTO days for sick time before your short-term disability benefits kick in.

How to Manage Your PTO

Under a PTO plan, “employees own the burden of plotting out [their] year for both planned and unplanned time off,” says David Lewis, president of OperationsInc.com, a human resources consulting firm in Stamford, Connecticut. Since you can’t know for certain how much time off you’ll need for sick days, school snow days and the like, this challenge can be substantial.

“If you have 25 PTO days, don’t get sucked into the trap [of thinking] that you have five weeks’ vacation,” Lewis advises. Instead, add up the days you took off in the previous year for unanticipated sick and personal needs, and project from there.

Also be aware that some companies may use the conversion to a PTO plan to begin charging your time-off account for personal appointments such as doctor visits. If your employer trumpets the flexibility of time-off increments as small as half a day or even an hour, you might want to plan for a couple of days of PTO per year for doctor and dentist appointments, even if you’re in excellent health.